Best Buy's 'Get out of Jail Free' Card

Retailer hhgregg (HGG) reported a painful same-stores sales decline of 11.2% for the holiday quarter -- double the expected drop. Appliances were the bright spot, as comps rose 1.5% in that category. Home products comprise a new product category, so this segment registered a 36% same-store-sales climb. (If you put enough new stuff in the store, you can actually bump up your comps in the short term.)

Comps for consumer electronics, on the other hand, declined 20%, and computing and wireless plummeted 25%. This isn't exactly a good indicator for Best Buy (BBY), the dark horse retail winner of 2013. Consider that, last quarter, Best Buy derived 29% of business from the consumer-electronics category and 49% from computing and mobile. Appliances represented only 8% for the retailer.

Best Buy shares did trade down Monday in sympathy with hhgregg -- yes, it's pretty scary when your competitor announces a decline of more than 20% in the categories that represent 80% of your business However, there is some good news.

1. You see, hhgregg decided "not to fully participate" in the heavy promotional activity in the most important quarter of the year, according to the press release. That was simply a bad call.

2. Best Buy has declared it will not surrender market share -- and, at the other end of the spectrum from hhgregg, Best Buy has also used fighting words ("table stakes") when talking about the fourth-quarter battle. The company also could not have been clearer in communicating that margin would be traded for sales. Estimates call for a decline of more than 100 basis points in the fiscal fourth quarter.

3. Last quarter, expectations for Best Buy were elevated going into the print, as the Street raised comps estimates in the weeks before the announcement. This quarter, in part thanks to hhgregg, investors are lowering expectations.

4. Best Buy is not hhgregg. While hhgregg has decided to save itself by not competing and adding fitness and home furniture (as referenced above), Best Buy continues to focus on optimizing space in the core relevant categories.

Hhgregg and Best Buy do have something in common: Both had been left for dead in 2012, so each managed massive share climbs last year -- 92% for hhgregg and 225% for Best Buy. But, in 2014, merely failing to disappear won't be enough.